Fitch Affirms BancWest Corporation's L-T IDR at 'A'; Outlook Stable

Thu May 22, 2014 12:25pm EDT

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(The following statement was released by the rating agency) NEW YORK, May 22 (Fitch) Fitch Ratings has affirmed BancWest Corporation's (BWE) Long-term Issuer Default Rating (IDR) at 'A'. The Rating Outlook on the Long-term IDR is Stable. Fitch has also affirmed BWE's Viability Rating (VR) at 'a-'. The ratings of the subsidiary banks, Bank of the West (BOW) and First Hawaiian Bank (FHB) were also affirmed. A full list of rating actions follows at the end of this release. Key Ratings Drivers - IDRs and VRs The IDRs of BWE and its subsidiary banks are linked to that of their 100% owner, BNP Paribas (BNPP). Fitch believes that BWE is a strategically important subsidiary to BNPP, as described in its rating Criteria ('Rating FI Subsidiaries and Holding Companies'). The VR represents the standalone strength of the institution. BWE's 'a-' rating is driven by the company's solid franchise and asset quality metrics in line with its VR. These strengths are balanced against BWE's relatively weaker profitability metrics and less diversified revenue mix compared to its regional bank peers. Core earnings continue to lag the peer median as a weak net interest margin pressures earnings. Over the medium- to long-term, Fitch expects earnings levels to improve as rates move higher. Given that BWE is relatively more reliant on spread income than its regional bank peers, higher rates are necessary for the company to achieve core earnings more in line with the peer median. Capital levels are relatively unchanged year over year. BWE's tangible common equity ratio at 8.4% remains near the peer median. Although double leverage appears slightly on the high side, Fitch is less concerned, as holding company debt is virtually all intra-group. BWE, as a foreign-owned bank holding company, loses its regulatory capital exemption in 2015. Fitch believes capital levels are well positioned to comply with regulatory capital expectations, which includes participation in the Federal Reserve's stress testing process next year. Fitch regards asset quality to be consistent with the current ratings. Non-performing assets (NPAs) declined to 2.0% in first quarter 2014 (1Q'14), down from 2.3% the prior year. Fitch expects continued gradual reduction of NPAs in the near term. Net charge offs (NCOs) were very low in 2013 at 0.2%. Asset quality remains stronger at the First Hawaiian Bank subsidiary; NPAs total just 0.8% at 1Q'14. BWE is a bank holding company that principally operates via its two bank subsidiaries: Bank of the West and First Hawaiian Bank. BWE had $84.9 billion in total assets at March 31, 2014 with over 700 offices in the western U.S., principally in California and Hawaii. RATING SENSITIVITIES - IDRs and VRs The IDRs of BWE and its subsidiaries are linked to that of BNPP. Should BNPP's IDR change, the IDRs of BWE could also be affected. Fitch notes that BNPP's potential fine from U.S. regulators is not expected to impact the parent company ratings. However, should the outcome of any potential BNPP settlement be different from Fitch's assumptions, the IDRs of BNPP and BWE could be affected. Additionally, although not viewed as likely in the near term, if BWE becomes less strategically important to BNPP, its IDR could be downgraded. Fitch believes that the VRs have limited upside in the near term. However, continued strengthening of capital at the holding company, consistent credit improvement, and a more diversified earnings profile commensurate with higher rated peers could affect the VR positively in the long term. Conversely, negative pressure on the VR could occur should current positive credit trends materially reverse and credit losses escalate, and/or core earnings deteriorate from current levels. KEY RATING DRIVERS - SUPPORT RATING AND SUPPORT RATING FLOOR BWE's Support Rating of '1' reflects the high probability of support from its parent, BNPP. Since this support is based on institutional support, as opposed to sovereign support, there is no Support Floor Rating assigned. RATING SENSITIVITIES - SUPPORT RATING AND SUPPORT RATING FLOOR BWE's Support Rating is sensitive to changes in a number of factors including but not limited to strategic importance of the financial institution to BNPP; degree of integration with a parent; guarantees and commitments provided by the parent; percentage ownership or control; jurisdiction; track record of support; cost of support; the nature of the owner; and the importance of the franchise to the owning institution. KEY RATING DRIVERS - Long and Short-term Deposit Ratings BWE's long-term deposit ratings are one notch higher than the company's IDR, which reflect depositor preference for the U.S. banks. BWE's Short-term Deposit Rating at 'F1' are linked to the Long-term IDR per Fitch's rating criteria. KEY RATING DRIVERS - Long- and Short-term Deposit Ratings BWE's long-term Deposit Ratings are one notch higher than the company's IDR, which reflect depositor preference at U.S. banks. BWE's Short-term Deposit Rating at 'F1' are linked to the Long-term IDR per Fitch's rating criteria. KEY RATING SENSITIVITIES - Long- and Short-term Deposit Ratings BWE's long- and short-term Deposit Ratings are linked to the company's Long-term IDR. Any changes to the Long-term IDR could impact the deposit ratings. The following ratings have been affirmed: BancWest Corporation --Long-term IDR at 'A'; Outlook Stable; --Viability Rating 'a-'. --Short-term IDR at 'F1'; --Support Rating at '1'. Bank of the West --Long-term IDR at 'A'; Outlook Stable; --Short-term IDR at 'F1'; --Viability rating at 'a-'; --Support rating at '1'; --Long-term deposits at 'A+'; --Short-term deposits at 'F1'. First Hawaiian Bank --Long-term IDR at 'A'; Outlook Stable; --Short-term IDR at 'F1'; --Viability rating at 'a-'; --Support rating a '1'; --Long-term deposits at 'A+'; --Short-term deposits at 'F1'. Contact: Primary Analyst Jaymin Berg, CPA Director +1-212-908-0368 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Christopher Wolfe Director +1-212-908-0771 Committee Chairperson Joo-Yung Lee Managing Director +1-212-908-0560 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'2014 Outlook: U.S. Banks' --'U.S. Banks: Liquidity and Deposit Funding' --'U.S. Banks: Interest Rate Risks (What Happens When Rates Rise)' --'U.S. Bank Mergers and Acquisitions -- When Will The Catalysts Kick In?' --'Fitch Fundamentals Index' --'Risk Radar Global - 1Q13' --'U.S. Banking Quarterly Comment: 4Q13 (Earnings Continue to Tick Up, but Challenges Remain)' --'Global Financial Institutions Rating Criteria Assessing and Rating Bank Subordinated and Hybrid Securities Criteria' --'Fitch Global Corporate Rating Activity -- Third-Quarter 2013' --Corporate Bond Comparator 1Q14: US vs EMEA' Applicable Criteria and Related Research: Fitch Global Corporate Rating Activity —Third-Quarter 2013 here Corporate Bond Comparator 1Q14: US vs EMEA here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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